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It is a seller's market in real estate this year and with spring around the corner, the competition for homes is likely to get even more fierce. If you are looking to purchase a home right now, chances are you may find yourself in a bidding war. Be prepared! Here are six ways to come out on top in a bidding war:

- Get your finances in order and get as much cash as you can. It is never too soon to get pre-approved for a loan. In fact, the sooner the better. Sellers will have lots of options and will be leery of those who do not have loans set in stone. If possible, bring cash to the table. Sellers will fear appraisals coming in low and loans falling through, so be prepared to cover the difference with cash.

- Don’t hesitate! Be the first to make an offer, and make it a good one. An insulting offer will put you at the bottom of the seller’s list, so it is not a good time to low ball. Come in at or slightly below asking price so that they know you are serious about purchasing their home.

- Have an escalation clause in your offer. This is the amount of money the buyer agrees to increase the offer if there are other bids. If you offer the asking price of $400,000 on a house, but it might sell for $450,000, put in an escalation clause stating that you are willing to go as high as $460,000. But know your limit. Don’t offer more than you can handle. Also, make sure the clause states that the seller can only take the winning bid up to a level just above the competing offers. For example, if an offer comes in for $430,000, your bid would be upped to $431,000.

- Get a pre-inspection. It will cost you a few hundred dollars, but it can help you in a super-tight market. If you can make a bid that is not contingent upon inspection, sellers will look favorably on your offer versus the same offer from someone who has a contingency in their contract.
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- Show the love! If you have found the perfect house and know you love it, don’t be afraid to let the sellers know, either directly or through your Realtor. You can write a letter, send pictures of your family or even make a video describing why you love the house so much. Be specific in your praise. Sellers may appreciation the connection you feel with the house and choose you over other bidders.​

- Think with your head, not your heart. Be smart! Purchasing a home is an emotional decision, but emotions can get in the way of making wise decisions. Make sure you have done thorough research of the market: look at the most recent comparable sales, compare prices from a year ago, visit local school, have coffee at the closest café and speak to potential neighbors. Look at listings nearby. Whatever you do, don’t overpay because you get caught up in the heat of the competition. While the house may seem perfect for you, it is not the only house that will be perfect for you. So, keep a level head and make intelligent decisions.

Melissa Thompson is an experienced, professional Realtor who can help you through the negotiations involved in a bidding war. Give her a call at 901-756--8900 and start your home search today!

With all the fees and expenses involved in purchasing a home, it may be tempting to skip the home inspection to avoid spending the money. But in the long run, it may cost you more to skip it. Home inspections sometimes reveal things that ultimately could have cost you way more than the fee involved.

While you might think that sellers are being honest about the condition of the home, it’s important not to take their word for it. Truthfully, they probably are being honest. But they don’t necessarily see what could be “wrong” with the house any more than you do. That’s why you need an expert to come in and do the inspection. They can find things that never would be noticed by the naked eye because they know what to look for. Home inspectors can also give you advice and things to look out for in the future. With that information, you can have an idea of how to prepare for potential costs down the road.

A home inspection can be a deal breaker as well. For example, if sellers offer a discounted price or cash back for skipping the inspection, walk away from the deal. This is a huge red flag! A home inspection only takes a few hours and is paid for by buyers, so there is no reason sellers should protest unless there are critical issues in the home they know about and are trying to hide.

When hiring a home inspector, you want someone with many years of experience and proper certifications and licenses. You also want someone who will be thorough…willing to go through the basement, attic and up on the roof to check out every nook and cranny of the home. It’s important to gather as much information about the house as possible so that you know what you are getting in to.

It is not mandatory for you to be present for the inspection, but it’s a good idea to be there. Some inspectors are happy to have you walk along with them and ask questions as you go. Others will want to do the inspection on their own and then have you do a walk through with them after they are done. Either way, be sure to look carefully through the report they give you and ask as many questions as you want. Remember that you are paying for their time, so don’t hesitate to have them go over the report with you so that you have a clear understanding of it.

Even if your inspection comes up clean, the fee you pay is worth the price to have peace of mind. Include it in your home-buying budget and don’t think of it as an “extra” expense. It is a crucial element of your decision in purchasing the home and paying a $450 fee and finding nothing wrong is better than skipping it and ending up having to replace your roof for $3000!

As a Realtor, I love helping people purchase their first home. However, there are two major challenges that I see time and time again with first time home buyers:

- They often carry too much debt.
- They don’t have enough cash for a down payment.

These two issues are strongly related in that people need to reduce debts that inhibit them from saving money.

We all know that we shouldn’t spend more than we earn, but falling into the debt trap is easy to do. You see an expensive item that you must have and you think, I will use my credit card now and pay for it with my next paycheck. It sounds reasonable at the time, but next thing you know you’ve done something like that often enough that there is a beastly credit card balance hanging over your head.

So, now you’re in debt. You have regrets, but no use doing the “should have, would have, could have” dance. Now it’s time to move forward and take the steps needed to reduce your debt. Here is a list of things to do to change the way you manage your money. Follow these steps and before you know it you will be on your way to saving for a down payment on your first home!

- Stop adding to your debt. The first step to getting out of debt is to stop adding to your outstanding balances. To remove temptation, carry only one credit card with you…and make sure it is the one with the lowest limit so that it is impossible to get into serious trouble with it. Leave any other credit cards in a safe place at home to keep yourself from going on an impulsive shopping spree.

- Take an inventory of your spending habits. This may not be a fun activity, but it is helpful to see how you are spending. Create a list of where your money goes each month including rent, utilities, car payments, food, credit cards etc. Once you have done this, split the list into two categories: bills you must pay every month and debts you need to pay off. The second list then can be organized in order of urgency, either based on outstanding balance or highest interest rate. Now you will have a clear picture of your debt situation. Financial Inventory

- Eliminate the largest debts first. Make a minimum payment for each of your credit card bills, but then make an extra payment on the bill that is at the top of your list. Do this monthly until that bill is paid in full. Now take the money you were using for that bill and start applying it to the second item on your list. Continue this until all of them are paid off.

- Cutting expenses and making the payment. If you are already in debt, how are you going to find money for an extra payment? Well, some sacrifices must be made. Cutting back on extras like trips to Starbucks, entertainment and eating out can free up cash that can go toward that extra payment each month. Ways to Cut Monthly Expenses

- Prepare for the Unexpected. Sometimes life is a struggle and unexpected challenges such as car repairs or medical expenses will pop up from time to time. As you cut expenses and start to save money, set up an emergency savings account just for these occasions. That way you will be prepared and won’t have to use a credit card and add to your debt.

- Lower your interest rates. Give your credit card company a call to see if they will lower your interest rate. If they say no, shop around for a card with a lower rate and transfer your debt (be careful of transfer fees to make sure the transfer benefits you). You can also seek out a consolidation loan from your bank. They will pay off your debt and you can pay them back at a lower interest rate. How to Lower Credit Card Interest Rates

- Stick to it! As you see your debt decrease and see your cash increase, don’t fall back into old spending habits. As you have more money available, put it right into your savings and soon you will have the money you need for a down payment on your first home!

When you are ready to start your home search, contact the professionals at Your Key to Memphis to assist you with all your real estate needs!

We recently shared that over the course of the last 12 months, home prices have appreciated by 7.0%. Over the same amount of time, interest rates have remained historically low which has allowed many buyers to enter the market.

As a seller, you will likely be most concerned about ‘short-term price’ – where home values are headed over the next six months. As a buyer, however, you must not be concerned about price, but instead about the ‘long-term cost’ of the home.

The Mortgage Bankers Association (MBA), Freddie Mac, and Fannie Mae all project that mortgage interest rates will increase by this time next year. According to CoreLogic’s most recent Home Price Index Report, home prices will appreciate by 4.7% over the next 12 months.

What Does This Mean as a Buyer?

If home prices appreciate by 4.7% over the next twelve months as predicted by CoreLogic, here is a simple demonstration of the impact that an increase in interest rate would have on the mortgage payment of a home selling for approximately $250,000 today:

Bottom Line

If buying a home is in your plan for 2018, doing it sooner rather than later could save you thousands of dollars over the terms of your loan.

Whether you are buying or selling a home for the first time or you are a seasoned veteran of buying/selling real estate, chances are you think you have the knowledge needed to navigate the process based on what you have read or heard from friends and family. Unfortunately there are a plethora of myths circulating about buying and selling houses that have become prevalent, but just aren’t true. The pitfall of believing everything you hear or read is that real estate myths can hurt you where it counts…in the wallet. Here are eight common ones that can cause home buyers/sellers to make unnecessary mistakes:

Set your home price higher than what you expect to get.Setting your asking price too high may net you a lower price. That’s because many shoppers and their real estate agents will not look at houses that are priced above market value. While it’s true that you can lower your price if you have not gotten offers in the first few weeks, “Buyers are highly suspicious of houses that have sat on the market for more than three weeks,” says Nela Richardson, chief economist for the brokerage Redfin.

You can get a better deal as a buyer if you don’t use a real estate agent.

This is a false assumption. When a house is listed with an agent, the total sales commission is already built into the price. If the buyer doesn’t use and agent, that just means the selling agent will get the entire commission.

You can save money selling your home yourself.

While it is possible to successfully sell your home on your own, there is a great deal of work that goes into it. You must know how to get the home listed online, market it to prospective buyers, negotiate the contract and deal with any issues that arise during the inspection or loan application phases. In addition, buyers will expect a significant discount, so what you might save on real estate commission may not be as much as you thought it would be.

The market will only go up.

Over the years, homebuyers and sellers have experienced a time of increasing home values, then a sharp decline due to the economy and then an upturn where values increase again. But many people believe the market only goes up. You need to be aware that prices can fall dramatically.

You should renovate your kitchen and bathroom before you sell.

If your kitchen and bathroom are in working order, an extensive remodel could be a mistake. Potential buyers might not like what you’ve done with the place, but they don’t want to change something that has just been renovated. You are better off adjusting your price accordingly.

You’ll earn back what you spend on renovations.

Repairing things like your heating system, air conditioner or roof may help your home to sell faster, but you probably will not recoup what you spend. Per Remodeling Magazine’s 2017 cost-vs-value report, the only renovation that is likely to net you as much as you spent is adding fiberglass attic insulation. You will likely only get back 65.3% on a full kitchen renovation. And redoing your bathroom might get you 59.1%.

All the properties listed in the multiple listing service show up online.

Your agent must choose to let the listings show up online. Most do, but it’s a good idea to verify that yours will.

Open houses sell properties.

Homes rarely sell to buyers who have visited them during open houses. Agents like to have open houses because it helps them to find additional potential customers. If you and your agent opt not to have an open house, it probably won’t hurt the chances of selling. On the other hand, having a broker’s open house for other agents might be worthwhile.

There is little doubt that it is easier to get a home mortgage today than it was last year. The Mortgage Credit Availability Index (MCAI), published by the Mortgage Bankers Association, shows that mortgage credit has become more available in each of the last several years. In fact, in just the last year:

More buyers are putting less than 20% down to purchase a home

The average credit score on closed mortgages is lower

More low-down-payment programs have been introduced

This has some people worrying that we are returning to the lax lending standards which led to the boom and bust that real estate experienced ten years ago. Let’s alleviate some of that concern.

The graph below shows the MCAI going back to the boom years of 2004-2005. The higher the graph line, the easier it was to get a mortgage.

As you can see, lending standards were much more lenient from 2004 to 2007. Though it has gradually become easier to get a mortgage since 2011, we are nowhere near the lenient standards during the boom.

“Measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates … it is easier to get a loan.”

Here is a graph showing their findings:

Again, today’s lending standards are nowhere near the levels of the boom years. As a matter of fact, they are more stringent than they were even before the boom.

Bottom Line

It is getting easier to gain financing for a home purchase. However, we are not seeing the irresponsible lending that caused the housing crisis.